The National Farmers’ Union (“NFU”) are encouraging their members to sit down with Labour MPs with an accountant or agricultural lawyer to “debunk the Treasury’s story about the few farms that will be impacted” (as quoted by The Grocer on 11 December 2024). Our Tax and Rural Property Teams would be delighted to assist any members of the agricultural community in this way. It is clear that the impact will be greater than initial treasury assessments with hundreds of Oxfordshire farmers (and their tractors) protesting during the Environment Secretary’s speech at the Oxford Farming Conference this week (week commencing 6 January 2025) and The Central Association of Agricultural Valuers calculating 89,500 farmers will be impacted (as stated by Farmers Weekly on 9 January 2025) which is 20% higher than previous figures. As part of our series of articles discussing proposed changes to Agricultural Property Relief (“APR”) and Business Property Relief (“BPR”), Nicholas Thompson, a Trainee Solicitor in our Private Client Team, explains the types of property benefiting from BPR.
BPR summary
BPR is a 50% or 100% relief on inheritance tax (“IHT”) in relation to qualifying business property held for business purposes. For a summary of proposed changes to BPR and its companion relief, APR, please see our November article (available here). Draft legislation has not yet been released but a nine-page summary of the proposed changes effective 26 April 2026, published by His Majesty’s Treasury, does not suggest that the definition of business property will be significantly altered. It should be stressed that, whilst APR and BPR dovetail, BPR applies to any qualifying business regardless of whether it is agricultural in nature.
Some finer points on applying BPR
It is important to note that any property benefiting from BPR must have been held by the deceased owner for a minimum of two years prior to their date of death or date of gift during which period the property was mainly used for the business. If at the point of gift or inheritance it is not expected that the property will be of future use to the business, it will not qualify for BPR. It was determined in Trustees of the Nelson Dance Family Settlement v HMRC (2009) that specific business assets can qualify for BPR meaning the business need not be transferred as a whole as a going concern, as is required by Value-added Tax (“VAT”) and Capital Gains Tax (“CGT”).
Additionally, government guidance states that if property is part used for the business but also part not used for the business, only the part of the property used for the business may qualify for BPR. A notable case contradicting this guidance is Seymour (Ninth Marquess of Hertford) v Commissioners of the Inland Revenue (2004). This case judged that the whole of Ragley Hall qualified for 100% BPR despite 22% of the interior being retained as private residences for the Eighth Marquess of Hertford and the Ninth Marquess of Hertford (then the Earl of Yarmouth). This was because 78% of the interior of and all of the exterior of Ragley Hall were used for a business called ‘Ragley Hall Opening’ and run as an historic house open to the public.
One cannot claim BPR on any assets which qualify for APR. Despite this, it is worth noting that, under the existing regime, the ‘development value’ in agricultural land (i.e.; the land’s market value in excess of its ‘agricultural value’) may qualify for BPR.
Types of Property benefitting from BPR
One may claim 100% BPR on:
- a business or interest in a business; or – this includes sole traders, partnerships, joint ventures, trusts and personal companies. For sole traders, 100% BPR applies to the business as a whole. If a sole trader leaves specific business assets such as land, buildings, machinery or plant separately under their will, no BPR will be applicable. For sole trading farmers, the land will likely fall under APR however land which does not meet the ‘agricultural property’ definition may utilise BPR if it can be shown that the land is integral to the business being carried-on (as was the case with Ragley Hall, above).
- shares in an unlisted company. – this includes shares in private companies as well as shares listed on alternative markets such as the Alternative Investment Market (“AIM”) and the Off Exchange (“OFEX”).
One may claim 50% BPR on:
- shares controlling more than 50% of the voting rights in a listed company; – this relates to shares held on a Recognised Investment Exchange (“RIE”) such as the London Stock Exchange’s (“LSE”) Main Market.
- land, buildings or machinery owned by the deceased and used in a business they were a partner in or controlled; or – the assets must be wholly or mainly used for the purposes of the business. Cash held in the business surplus to the day-to-day needs of the business may not qualify for BPR unless a business case can be made for holding it. Such a business case would need to demonstrate that ‘the money will fall to be used upon a given project or for some palpable business’ as set out in Barclays Bank Trust Co Ltd v IRC (1998).
- land, buildings or machinery used in the business and held in a trust that it has the right to benefit from. – This would include assets held within a BPR Trust (“BPRT”). BPRTs are used to protect business assets from the potential creditors of and/or CGT implications for any beneficiaries and allow for more flexibility when distributing legacies as this would be up to trustee discretion.
The following property is noted in government documents as explicitly not qualifying for BPR:
A company which:
- mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments; – there is a general policy of barring relief from businesses which are not conducting business directly but whose primary business it investment. Farmer (Executors of Farmer deceased) v IRC (1999) provides the ‘in the round’ approach where the following five factors are considered to decide whether a business’ character is investment:
- the overall context of the business;
- the capital employed;
- the time spent by the employees;
- the turnover; and
- the profit.
- is a not-for-profit organisation; – This would be interests in not for profit organisations which have a tangible value. Such interests may benefit from the general charities and registered community sports clubs (“CASCs”) exemption from IHT under section 23 of the Inheritance Tax Act 1984.
- is being sold, unless the sale is to a company that will carry on the business and the estate will be paid mainly in shares of that company; and – This applies where the business is already subject to a contract for sale at the date of death.
- is being wound-up, unless this is part of a process to allow the business of the company to carry on. – As with businesses being sold, the key thread here is that the business must be continuing at the date of death. If proceedings to wind-up the business are already in place before the date of death, no BPR will apply.
It is, however, worth noting that the above assets which do not qualify for BPR may qualify for APR if the requirements for that relief are met.
If this affects you or your family we would be happy to assist with legal advice regarding reliefs currently available and estate planning measures which might be taken now. We can advise anyone who may need to update their existing Will, or make one for the first time, in order to ensure their estate planning is up to date. A professionally drawn Will alongside an estate planning strategy, both updated at regular intervals, is always advisable to minimise the risk of falling foul of changes to legislation.
Please contact Catherine Pugsley or Nicholas Thompson in our Private Client Team or Archie Sherbrooke in our Rural Property Team on 0207 222 5381 to discuss this further.